Kế toán, kiểm toán - The revenue cycle

The revenue cycleLearning objectivesTo learn about the revenue cycle business activities.To learn to flow chart the revenue cycle business activities.To understand the processing of the revenue cycle transactions using a computer.To know what the control practices and procedures are in the revenue cycle.key termsbalance forward methodbill of ladingbillingcash on deliverycredit limitcycle billingdelivery noteGoods and Services Taxopen invoice methodpicking slip post-invoicingpre-invoicingremittance advicestatement of accountstax invoiceterms of paymentRevenue cycleDeals with transaction processing involved in selling goods or servicesSales can be made for cash or on creditRevenue cycle business activitiesMain functions (cash sale):accepting customer requests for goods or servicesdelivery of goods or servicesinvoicingdealing with returned goodsreceiving and recording customer paymentsRevenue cycle business activitiesAdditional functions (credit sale):approving credit and credit limitsrecording accounts receivablesending periodical statements to customersdealing with bad debts Revenue cycle business activitiesCategories of activities in revenue cycle:processing customer ordersdelivery/shippinginvoicingaccounts receivable ledgerProcessing customer ordersCustomer orders:accepting requests from customerspreparing sales orderApproving credit and credit limits:screening new customerssetting maximum limitprocessing requests to increase limitperiodic checks on existing customersDelivery/shipping of goods or providing a serviceDelivery/shipping of goods:receiving sales orderpreparing the dispatch order and delivery notesProviding a service:recording labour and materials used (job card)Invoicingand recording accounts receivableDetails on sales invoice:invoice numbername of supplierABNdate of invoicedescription of goodsquantity of goodsGST inclusive pricediscount allowedTerms2/7 - 2% discount if account is paid within 7 daysn/30 - net amount payable within 30 days10/eom - payment required within 10 days after the end of the monthnet cash 30 days - payment required within 30 days of the end of the month in which delivery is made Types of invoicingPre-invoicing: invoice prepared when sales order is approvedPost-invoicing: invoice prepared and dispatched after delivery of goods or servicesAccounts receivable ledgerCustomers referred to as debtorsAccounts receivable is an assetSubsidiary ledger maintains asset detailsSource document for this ledger is sales invoice issuedStatement of accounts sent to customers at end of each period showing details of account transactions and outstanding balanceAccounts receivable ledgerCredit or adjustment notes:prepared when goods are returnedrecorded in sales returns journalsBad debts:amounts owing by debtors that are unable to be collectedAccounts receivable ledger Revenue cycle ends with customer payments that may take the form of:cash – from cash salescheques – most common form of paymentbank transfersdirect deposits or EFT Details of all payments are recorded in the cash receipts journalSales functionSales returns functionInternal controls procedures for the revenue cyclePrompt transfer of customer orders to sales ordersStrict procedures for granting credit Set policy on credit amounts and terms and discountsPrompt invoicing in separate departmentSegregation of duties ondispatch invoice preparationProper authorisation procedures for discounts, returns and allowances and bad debt write offsSequentially pre-numbered invoices, receipts etc.Cash registers with sealed till rolesComputer application systems for the revenue cycleComputers play an important role where large numbers of transactions are processed:record the information in the same categories as a manual systemquickly produce the documentation requiredrecord reservation of goods and services orderedeasily generate detailed reports for management usereduce labour costsreduce errors in pricing etc.Controls in the computer environmentApplication controls required:Input controls detect and prevent errors when data is inputProcessing controlsdetect and prevent errors while processing is in progressOutput controlsdetect and prevent errors in outputs from processing